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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. The practice of selling essentially the same good to different groups of consumers at different prices






2. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






3. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






4. Models where firms are competitive rivals seeking to gain at the expense of their rivals






5. Models where firms agree to mutually improve their situation






6. Entry of new firms shifts the cost curves for all firms upward






7. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






8. The lost net benefit to society caused by a movement away from the competitive market equilibrium






9. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






10. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






11. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






12. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






13. The price of a good measured in units of currency






14. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






15. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






16. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






17. Ei = (%dQd good X)/(%d Income)






18. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






19. Occurs when LRAC is constant over a variety of plant sizes






20. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






21. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






22. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






23. All firms maximize profit by producing where MR = MC






24. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






25. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






26. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






27. Exists if a producer can produce more of a good than all other producers






28. Ed = 8 - infinite change in demand to price change






29. The ability to set the price above the perfectly competitive level






30. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






31. The rational decision maker chooses an action if MB = MC






32. Costs that change with the level of output. If output is zero - so are TVCs.






33. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






34. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






35. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






36. 0 < Ei < 1






37. The marginal utility from consumption of more and more of that item falls over time






38. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






39. Entry (or exit) of firms does not shift the cost curves of firms in the industry






40. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






41. Ed = 0 - no response to price change






42. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






43. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






44. Es = (%dQs) / (%dPrice)






45. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






46. Ei > 1






47. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






48. The difference between total revenue and total explicit costs






49. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






50. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.